The state of the craft beer industry: 3 West Michigan perspectives

The craft beer industry in Michigan essentially started with Larry Bell in 1985 launching what would become Bell’s Brewery Inc. Since then, and especially over the last decade, the industry has taken off in West Michigan and beyond.

In separate interviews, MiBiz asked three brewery owners in various stages of their careers to share their outlook on the state of the industry.

The Veteran: Tim Suprise, founder of Arcadia Brewing Co. in Battle Creek in 1996, which later opened a Kalamazoo brewery in 2014 and plans to launch a brewpub in Lansing this year.

The Intermediate:Max Trierweiler, co-founder of The Mitten Brewing Co. LLC in Grand Rapids, which opened a taproom and brewery in 2012 and expanded with an off-site production brewery in 2014.

The Startup: Mitch Ermatinger, co-founder of Speciation Artisan Ales LLC who plans to open a wild-fermentation, small-scale brewery in Comstock Park later in 2016. Initial plans call for the brewery to be open to customers just one day a month.

Here’s what they had to say.

What is the most significant challenge that the craft brewing industry faces in the next two years?

Suprise: I believe that probably the biggest challenge is making sure that the quality of the liquid that has come online in the last couple of years remains continuously improving and high quality across the board. That includes not only breweries that might be considered legacy craft brewers but most assuredly the newcomers to the industry. … The quality of the liquid is something that every brewer can control.

Trierweiler: We’ve got to stay focused on that we’re still creating a lifestyle here for a lot of people. We’re the craft beer industry, we’re one of the coolest industries to be in. With name disputes, fighting for shelf space and everything, everyone has got to keep in the back of their minds that this is still a great industry to be in, and you’ve got to stay friendly. Otherwise, we’re just going to become just like any other industry.

Ermatinger: The biggest challenge is competing against InBev and remaining independent. … They have all the firepower. They have the distributors, they have the supply and that gives them a big leg up. But the whole craft brewing world was built on small dudes being innovative, so I’m not worried about the future of independent craft beer. At the same time … we need to be vocal about it to the consumers so they know it does affect independent craft beer when they support Goose Island and any of these breweries that have sold out.

When will craft beer reach a saturation point? How close are we to that point now?

Suprise:I think there’s plenty of room for growth in market share in the United States. … However, I don’t think that the current rate of new brewery openings is sustainable. … Right now, they’re opening at the rate of 700 per year. I don’t know that that’s sustainable in the long term.

Trierweiler: Breweries have almost doubled since we opened … in 2012. Obviously, it’s growing pretty quickly. With the number of stores and storefronts — the pubs and tasting rooms that exist — it’s going to be difficult to reach a saturation point as far as that’s concerned. As far as distribution is concerned, … it’s pretty ridiculous walking into beer stores (and seeing) the number of breweries that are on the shelf. I think it’s already starting to get a little saturated there, in the sense that distributors have so many brands to deal with now that they can’t keep track of them all and they can’t push all of them.

Ermatinger: I don’t think everything in the market will be saturated until everything in the market is very high quality. … We’ve got a lot of room to grow and there’s a decent amount of bad beer out there still. Until all the bad beer’s out of the market, I don’t think it’s even close to being saturated. There’s going to be a sacrifice. Breweries will have to close.

How much sales and marketing do brewers need to be prepared to do to support their brands as the distribution tier consolidates and as more craft producers come online?

Suprise:Each craft brewer that is competing on a statewide level, in any state that they’re in, has to elevate their game relative to sales and marketing and the support that goes with it. That’s both within the wholesale distribution tier … and our retail customer tier. It really is going to start with engaging and being more active and more supportive and allocating the relative resources to helping our distributor partners.

Trierweiler: As we get more into it, we’re learning that … the breweries have to hold accounts accountable and go out there and shake hands and smile. It’s definitely a necessity. … You have to have representation from the brewery at bars and restaurants if you want tap handles, at convenience stores if you want shelf space — and make a regular thing of it.

Ermatinger: If you’re going to make your money from wholesale, you’re going to have to have a massive, massive sales team. It’s like that in any business. Beer isn’t any different from any business in that regard. But that’s also why I’m doing what I’m doing. … My marketing and sales team is me and my wife, but I like it that way. It’s much simpler.

Where’s the sweet spot for a brewery these days: a regional brewery with aspirations of going national, a local brewery expanding to be regional, or just staying locally focused?

Suprise: Each level you go up, you’re at a higher level (of competition) than you ever have been before. … Our model is based on making the transition from local to regional — 10 to 15 states centered in and around a 350- to 400-mile radius of our brewery. … Our model, our facility, our game plan is predicated on going local to regional, not making the regional to national jump. I would not want to be doing that myself.

Trierweiler:I’m leaning toward the middle, a local looking to go regional. … The storefronts — that’s where I think the opportunity lies right now, in retail sales, as opposed to distribution.

Ermatinger: I prefer to be smaller because it’s more financially sustainable. You have to be a financially sustainable business to be successful. … It’s a big pull on your energy and resources when you have people that are looking for money and breathing down your back all the time.

How will the influx of capital — whether banks, private equity and other investors, or strategic buyers — affect the industry in the years to come?

Suprise: I think that the window is more closing now than it is open. … In terms of strategic acquisition, strategic alliances and private equity coming into the mix, that’s been going on for a couple of years. I’m not saying it’s going to dry up. I think we’re going to see at least another year to 18 months more of that activity, but it has had an impact on access to market and distribution.

Trierweiler: I don’t think we’ll see it change until breweries start closing their doors. … Even though there’s all these breweries popping up, there’s still only 29 to 32 microbreweries that are closing their doors every year. That’s the way it has been for last five to 10 years. Until the investment becomes a little more risky and those numbers show it, I think that people are going to be willing to invest. … There’s plenty of money to be had.

Ermatinger: I think it is a problem already from the fact that there are lots of these breweries that are starting up multi-, multi-million dollar breweries. They realize very quickly the volume of beer you have to sell in order to make a profit — and not even make a profit, just pay your investors back and pay your bills. It’s very difficult to sell that much beer out of the gate. What that does, usually, is they start looking for a buyer.